10-Q: U-Haul Holdings Q2 Profit Plunges Amid Rising Costs

U-Haul Holding Company reported a significant decline in net earnings for the second quarter and first six months of fiscal 2026, despite revenue growth in its core moving and storage segments, primarily due to increased operating expenses, depreciation, and interest costs.

Summary

• Total revenues for the second quarter ended September 30, 2025, increased by $61.8 million, or 3.7%, to $1.72 billion, compared to $1.66 billion in the prior year.
• Net earnings available to common stockholders for the second quarter decreased by $81.2 million, or 43.5%, to $105.6 million, down from $186.8 million in the same period last year.
• Basic and diluted earnings per share of Common Stock fell to $0.49 for the quarter, a 46.2% decrease from $0.91 in the prior year.
• For the six months ended September 30, 2025, total revenues rose by $143.8 million, or 4.5%, to $3.35 billion, compared to $3.21 billion in the previous year.
• Net earnings available to common stockholders for the six months decreased by $134.3 million, or 35.1%, to $247.9 million, from $382.2 million in the prior year.
• Basic and diluted earnings per common share for the six months were $1.17, a 37.1% decrease from $1.86 in the prior year.
• Self-moving equipment rental revenues increased by $23.1 million (2.1%) for the quarter and $67.1 million (3.2%) for the six months, driven by higher revenue per transaction and an expanded rental fleet.
• Self-storage revenues grew by $21.8 million (9.7%) for the quarter and $40.3 million (9.1%) for the six months, attributed to occupancy gains, new capacity additions (1.6 million net rentable square feet in Q2, 2.8 million in 6 months), and a 4.9% improvement in average revenue per occupied foot for the quarter.
• Total costs and expenses increased significantly by $146.2 million (10.8%) for the quarter and $277.0 million (10.7%) for the six months, primarily due to higher depreciation, net losses on disposal of rental equipment, and increased interest expense.
• Depreciation expense, net of gains/losses on disposals, surged by $113.3 million (49.9%) for the quarter and $200.8 million (45.3%) for the six months, mainly due to an increase in box trucks and expected decreases in resale values.
• Net losses from the disposal of rental equipment increased by $56.1 million for the quarter, as resale values decreased while the average cost of units sold increased.
• Interest expense rose by $18.8 million (26.3%) for the quarter and $33.9 million (24.5%) for the six months, driven by an increase in outstanding debt and the average cost of debt.
• Life insurance premiums decreased by $2.1 million (10.3%) for the quarter and $3.7 million (8.9%) for the six months, primarily due to decreased life and Medicare supplement premiums, with policyholder lapses outweighing sales levels.
• Cash and cash equivalents increased to $1.08 billion as of September 30, 2025, from $988.8 million as of March 31, 2025.
• The company is owed $129 million plus $22.4 million in interest from the IRS following a finalized tax examination for fiscal years March 2014 through March 2021.

Sentiment

Score: 3

Explanation: The sentiment is negative due to a substantial decline in net earnings and earnings per share, despite revenue growth. This profitability erosion is driven by significant increases in operating expenses, depreciation, and interest costs, indicating operational challenges and higher cost of capital. While revenue growth and strategic investments are positive, the sharp drop in the bottom line is a major concern.

Positives

• Total revenues increased by 3.7% for the quarter and 4.5% for the six months, demonstrating continued top-line growth.
• Self-moving equipment rental revenues grew by 2.1% for the quarter and 3.2% for the six months, driven by increased revenue per transaction and an expanded rental fleet.
• Self-storage revenues showed strong growth of 9.7% for the quarter and 9.1% for the six months, benefiting from occupancy gains, new capacity additions, and improved average revenue per occupied foot.
• The U-Box program contributed to a $12.2 million increase in 'Other revenue' for the quarter and $33.0 million for the six months, indicating successful expansion.
• Net cash provided by operating activities increased by $165.7 million in the first six months of fiscal 2026, reflecting improved operations and timing of credit card receivable settlements.
• The company has $465.0 million in additional cash available under existing credit facilities, providing liquidity.
• An IRS refund of $129 million plus $22.4 million in interest is being processed, which will further boost liquidity.

Negatives

• Net earnings available to common stockholders decreased significantly by 43.5% for the quarter and 35.1% for the six months.
• Basic and diluted earnings per share for Common Stock dropped by 46.2% for the quarter and 37.1% for the six months.
• Total costs and expenses increased substantially by 10.8% for the quarter and 10.7% for the six months, outpacing revenue growth.
• Depreciation expense, net of gains/losses on disposals, surged by 49.9% for the quarter and 45.3% for the six months, largely due to increased box trucks and lower expected resale values.
• Net losses from the disposal of rental equipment increased by $56.1 million for the quarter, reflecting decreased resale values and higher average costs of units sold.
• Interest expense rose by 26.3% for the quarter and 24.5% for the six months due to higher debt and increased average cost of debt.
• Life insurance premiums decreased by 10.3% for the quarter and 8.9% for the six months, primarily due to policyholder lapses exceeding new sales.
• Self-storage average monthly occupancy rate based on unit count decreased to 76.3% for the quarter (from 80.9%) and 77.2% for the six months (from 80.5%), despite new capacity additions.

Risks

• Potential future pandemics or similar events could impact system members or customers.
• The economic environment may adversely affect demand for products and the cost and availability of debt and capital.
• Fluctuations in costs to maintain and update the fleet and facilities could impact profitability.
• Reliance on a limited number of manufacturers for rental trucks poses supply chain risks.
• The ability to effectively hedge variable interest rate debt is crucial to manage interest rate risk.
• Control by a small contingent of stockholders could lead to concentrated decision-making.
• Quarterly results are subject to fluctuations and seasonality.
• Changes in, and compliance with, government regulations, particularly environmental and motor carrier operations, could incur significant costs.
• Outcomes of litigation could have a material adverse effect on financial position.
• Reliance on a third-party dealer network introduces operational dependencies.
• Liability claims relating to rental vehicles and equipment could increase costs.
• The ability to attract, motivate, and retain key employees is essential for operations.
• Reliance on automated systems and the internet exposes the company to technology, cybersecurity, or data security breaches.
• Credit ratings could impact borrowing costs and access to capital.
• The ability to recover under reinsurance arrangements is important for insurance segments.
• Inflationary pressures and/or imposition of tariffs may challenge the ability to maintain or improve operating margins.

Future Outlook

The company plans to continue focusing on increasing transaction volume and improving pricing, product, and utilization for self-moving equipment rentals. New investment in the truck fleet is expected to increase in fiscal 2026. For the self-storage business, the focus is on completing current projects, increasing occupancy in existing locations, and acquiring new properties, with spending on acquisitions and new development likely to remain high. Investments in the U-Box program will also continue. Inflationary pressures are anticipated to challenge the ability to maintain or improve operating margins. The Property and Casualty Insurance segment will continue its current services, while the Life Insurance segment aims to expand its presence in the senior market through agency growth, new product offerings, and business acquisitions.

Management Comments

• "Our overall strategy is to maintain our leadership position in the North American do-it-yourself moving and storage industry."
• "Our primary focus is to provide our customers with a wide selection of moving rental equipment, convenient self-storage rental facilities, portable moving and storage units and related moving and self-storage products and services."
• "We are committed to providing a complete line of products selected with the do-it-yourself moving and storage customer in mind."
• "Management believes that consolidating their calendar year into our fiscal year financial statements does not materially affect the presentation of financial position or results of operations."
• "Management believes it has adequate liquidity between cash and cash equivalents and unused borrowing capacity in existing credit facilities to meet the current and expected needs of the Company over the next several years."

Industry Context

U-Haul Holding Company operates in the highly competitive do-it-yourself moving and storage industry, where demand can be influenced by economic conditions and housing market trends. The company's strategy of expanding its rental fleet, self-storage capacity, and U-Box program aligns with broader industry trends of increasing consumer demand for flexible moving and storage solutions. However, the significant increase in operating costs, particularly depreciation and interest, reflects industry-wide challenges such as higher equipment acquisition costs, rising interest rates, and potentially softening resale markets for used assets. The decline in life insurance premiums due to policy lapses may indicate competitive pressures or changing consumer preferences in the senior market.

Legal Proceedings

• The company is named as a defendant in various claims and litigation arising out of the normal course of business, none of which are expected to have a material effect on financial position and results of operations.
• The company is aware of issues regarding hazardous substances on some of its properties and has remedial plans in place; compliance with environmental laws and cleanup costs are not expected to result in a material adverse effect.

Related Party Transactions

• U-Haul Holding Company has continuing related party interests with certain major stockholders, directors, and officers.
• Related party revenues from U-Haul management fees from Blackwater and Mercury were $9.6 million for the quarter and $19.2 million for the six months ended September 30, 2025.
• Related party costs and expenses, including lease, printing, and commission expenses to Blackwater and Mercury, totaled $32.7 million for the quarter and $64.9 million for the six months ended September 30, 2025.
• The company leases space for offices, repair shops, and hitch installation centers from subsidiaries of Blackwater and Mercury, with terms similar to those with unrelated parties.
• SAC Holdings provides ancillary and specialty printing services, with terms substantially identical to other vendors.
• Subsidiaries of Blackwater and Mercury act as independent dealers, receiving commissions based on equipment rental revenues under terms identical to other independent dealers.
• Related party assets include receivables from Blackwater ($31.2 million) and Mercury ($14.3 million) as of September 30, 2025.

Stakeholder Impact

• Shareholders: Significant decrease in net earnings and EPS may negatively impact shareholder value and dividend growth potential, despite continued dividend payments for Series N Non-Voting Common Stock.
• Employees: Increased personnel expenses suggest continued investment in the workforce, but overall profitability decline could create future pressure.
• Customers: Expansion of rental fleet, self-storage capacity, and U-Box program aims to improve service and availability, potentially benefiting customers.
• Creditors: Increased debt and interest expense, alongside declining profitability, could raise concerns about debt servicing capacity, although management states adequate liquidity and borrowing capacity.
• Suppliers: Continued high capital expenditures for rental equipment and real estate indicate ongoing demand for equipment and construction materials from suppliers.

Next Steps

• Focus on increasing transaction volume and improving pricing, product, and utilization for self-moving equipment rentals.
• Maintain an adequate level of new investment in the truck fleet, which is likely to increase in fiscal 2026.
• Complete current self-storage projects, increase occupancy in existing locations, and acquire new locations.
• Continue to invest capital and resources in the U-Box program throughout fiscal 2026.
• Property and Casualty Insurance will continue to provide loss adjusting and claims handling for U-Haul and underwrite protection packages.
• Life Insurance will pursue expanding its presence in the senior market by growing its agency force, expanding new product offerings, and pursuing business acquisition opportunities.
• Evaluate the impact of ASU 2023-09 (Income Tax Disclosure) on consolidated financial statements and disclosures.
• Assess the impact of ASU 2024-03 (Expense Disaggregation Disclosures) on consolidated financial statements and disclosures.
• Evaluate the impact of ASU 2025-05 (Financial Instruments Credit Losses) on consolidated financial statements and disclosures.
• Assess the impact of ASU 2025-06 (Intangibles—Goodwill and Other—Internal-Use Software) on consolidated financial statements and disclosures.

Key Dates

Recommendation

While U-Haul Holding Company demonstrates continued revenue growth in its core segments and strategic investments in fleet and storage expansion, the substantial decline in net earnings and earnings per share is a significant concern. This profitability erosion is driven by sharply rising operating expenses, particularly depreciation and interest costs. The company's strong liquidity position and ongoing IRS refund provide some cushion, but the increasing cost base and potential for inflationary pressures to challenge operating margins warrant caution. A 'hold' recommendation is appropriate for existing investors to monitor if the strategic investments can translate into improved profitability in future periods, while new investors might wait for clearer signs of margin stabilization or improvement before committing capital.

Keywords

Self-moving, Self-storage, Rental equipment, U-Haul, Insurance, Financial results, Earnings, Revenue, Depreciation, Interest expense, Capital expenditures, 10-Q, SEC filing